Blog Post

The government must support cities to develop road user charges

It is now apparent that, sooner or later, government will need to overhaul national vehicle taxation.

The switch to cleaner and more fuel-efficient vehicles, along with people’s changing travel habits, means that revenue from Vehicle Excise Duty (VED) and Fuel Duty has been declining. The government’s own policies exacerbate the issue; it has, for example, put in place a long-term fuel duty escalator freeze and is committed to ending the sale of all new conventional petrol and diesel vehicles by 2040.

Many have recommended a distance-based system as a way to ensure road funding is sustained and to accommodate a zero-emissions future. However, there seems to be limited appetite in the Treasury for this at the moment. Perhaps this is because the significant revenue drop is not projected for another 10 years or so, or because Fuel Duty is currently easy to collect, so there seems to be little incentive to overhaul it.

In the meantime, cities and regions in England have had the power to implement road user charging schemes, without holding local referenda or seeking government approval, since the Greater London Authority Act 1999 and the Transport Act 2000. For a long time, London was the only city to have exercised this power with the establishment of the Congestion Charge (CC) in 2003.

The government has now mandated a number of large cities to produce plans to tackle air pollution and some are looking to implement charging or non-charging Clean Air Zones. London has also established a new environmental charging scheme, the Ultra Low Emission Zone (ULEZ).

As the number of schemes across the country multiplies, it poses an important question: what happens to these schemes when a new national scheme becomes a priority for central government?

We believe it is vital that any government reforms complement, rather than try to absorb, any existing road user charging schemes. It makes sense for central government to replace VED and Fuel Duty with a distance-based charge for the use of the strategic road network managed by Highways England. This should be graduated depending on vehicle class and emissions to encourage cleaner vehicles. Its purpose would be purely to replace existing vehicle taxation, ensuring that a proportion of the revenue is hypothecated towards roads spending.

In contrast, the legislation stipulates that any city road user charging schemes should not be established to raise revenue but solely to address congestion and air pollution – and it makes sense that cities should decide how best to address these negative impacts of driving on locally-managed roads. This point is illustrated by the great number of variations in different cities’ CAZ proposals: some are non-charging, some are charging commercial vehicles (vans, trucks and buses) only, while others are proposing to charge private cars as well.

For a national scheme to try to absorb and reflect these various arrangements, especially of local schemes that vary the charge on the basis of locally observed congestion and pollution levels on the roads in question, would be too complex.

In the meantime, the government should support London with funding to implement a new distance-based road user charging scheme, just as other cities can access Clean Air Zone implementation funding and the Transforming Cities Fund. Once piloted in London, other cities would then be able to introduce elements of the scheme in the implementation of Clean Air Zones, to improve their overall air quality and health objectives.

Read the report


Silviya Barrett is Research Manager at Centre for London. Follow her on Twitter.